Question 1

Entry
1 Thompson invested a total of $165,000 as a business owner ($65,000 own funds,
$100,000 via bank loan)
2 Thompson paid rent for the month of September in cash ($1,485)
3 Merchandise inventory was bought for $137,500 in credit
4 Furniture and fixtures were bought for $15,500 in cash
5 Thompson availed of advertising services and paid $1,320 in cash
6 PC Depot's employees' wages were paid totaling $935
7 Office supplies bought for $1,100 cash
8 Utilities were paid for in cash ($275)

Question 2
Cash
(1) 165,000 (2) 1,485
(4) 15,500
(5) 1,320
(6) 935
(7) 1,100
(8) 275
165,000
20,615
144,385

Rent Expense
(2) 1,485
1,485
Merchandise Inventory
(3) 137,500
137,500
Furnitures and Fixtures
(4) 15,500
15,500
Advertising Expense
(5) 1,320
1,320
Wages Expense
(6) 935
935
Office Supplies Expense
(7) 1,100
1,100
Utilities Expense
(8) 275
75
Rent Expense
(2) 1,485
1,485

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(3) 137,500
137,500

Question 3
Journal Entries
#9
DR
Cash
CR
Sales Revenue
#10
DR

Accounts Receivable
CR
Sales Revenue

#11
DR

Cash
CR

#12
DR

#13
DR

#14
DR

#16
DR

Cost of Sales
CR
Merchandise Inventory

14,850
14,850

3,614

96,195

49,940

38,140
38,140

688
688

440
440

Prepaid Insurance
CR
Cash

2310

CR

Utilities Expense
Accounts Payable

Rent Expense
(2) 1,485
1,485

49,940

1,485

#19
DR

Cash
(1) 165,000 (2) 1,485
(9) 38,000
(4) 15,500
(11) 3,614
(5) 1,320
(12) 96,195 (6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660
277,051

96,195

Prepaid Rent
Cash

CR
#18
DR

Wage Expense
Cash

Wage Expense
CR
Accrued Wages

#17
DR

38,000

Accounts Receivable

Merchandise Inventory
CR
Accounts Payable

CR

38,000

3,614

Accounts paybale
CR
Cash

#15
DR

T accounts

1,485

Merchandise Inventory
(3) 137,500 (14) 38,140
(13) 49,940
149,300
Furnitures and Fixtures
(4) 15,500
(20) 1,760
17,260
Advertising Expense
(5) 1,320
1,320
Wages Expense
(6) 935
(15) 688
(16) 440
2063

2310

226
226

Office Supplies Expense

(7) 1,100
1,100

#20
DR

Furnitures and Fixtures

CR
Cash
CR
Accounts Payable

1,760
660
1,100

Utilities Expense
(8) 275
(19) 226
501
Accounts Receivable
(10) 14,850 (11) 3,614
11236
Cost of Sales
(14) 38,140
38140
Prepaid Rent
(17) 1,485
1485
Prepaid Insurance
(18) 2,310
2310

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(12) 96,195 (3) 137,500
(13) 49,940
(19) 226
(20) 1100
92571
Sales Revenue
(9) 38,000
(10) 14,850
52850
Accrued Wages
(16) 440
440

Question 4
Adjusting Entries
Journal Entry
#21
DR
Depreciation Expense
CR

> Calculation
Depreciation
17,260
10 years useful life

144
Accumulated Depreciation

144
1726

#22
DR

Interest Expense
CR

1250
Interest Payable

1726
12

1250

143.8333333
#23
DR

Insurance Expense
CR

193
Prepaid Insurance

Interest
193

100,000
15%
15000
1250
Insurance

Why are these adjusting entries required?

2310
Adjusting entries are needed at the end of this period to allocate revenue and expense items to the period they are actually a
Required because normal journal entries are based on actual transactions
192.5
and the date these transactions occured may not be the date required
to fulfill the matching principal of accrual accounting
**values rounded up
> Made at the end of accounting period to adjust/appropriate expenses and revenues to
the accounting period where they actually occurred
(these are adjustments based on REALITY and not on source document)
>principle of assigning revenues to the period in which they are earned
and expenses to the periods in which goods or services are used

T accounts
Furnitures and fixtures

deprecation per year

depreciation per month

Note payable
Interest
Interest for the year
Interest for the month

Insurance for 1 year

the period they are actually applicable.
Insurance for 1 month

Cash
(1) 165,000 (2) 1,485
(9) 38,000
(4) 15,500
(11) 3,614
(5) 1,320
(12) 96,195 (6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660
277,051
Rent Expense
(2) 1,485
1,485
Merchandise Inventory
(3) 137,500 (14) 38,140
(13) 49,940
149,300
Furnitures and Fixtures
(4) 15,500
(20) 1,760
17,260
Advertising Expense
(5) 1,320
1,320

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(12) 96,195 (3) 137,500
(13) 49,940
(19) 226
(20) 1100
92571
Sales Revenue
(9) 38,000
(10) 14,850
52850
Accrued Wages
(16) 440
440
Depreciation Expense
(21) 144
144
Accumulated Depreciation
(21) 144
144

Wages Expense
(6) 935
(15) 688
(16) 440

Interest Expense
(22) 1,250
1,250
2063

Office Supplies Expense

(7) 1,100
1,100
Utilities Expense

Interest Payable
(22) 1,250
1,250
Insurance Expense
(23) 193
193

(8) 275
(19) 226
501
Accounts Receivable
(10) 14,850 (11) 3,614
11236
Cost of Sales
(14) 38,140
38140
Prepaid Rent
(17) 1,485
1485
Prepaid Insurance
(18) 2,310
(23) 193
2117

Question 5
Closing Entries
#24
DR

#25
DR

Sales Revenue
CR

Income Summary
CR

52,850
Income Summary

52,850

46,196
Expenses**

46,196

**Total expenses

#26
DR

Income Summary
CR

6,654
Retained Earnings

6,654

(6) 935
(15) 688
(16) 440
0

(7) 1,100
0

(8) 275

(19) 226
0

(10) 14,850
11,236

(14) 38,140
0

(17) 1,485
1,485

(18) 2,310
2,117

T accounts

Cash
(2) 1,485
(4) 15,500
(5) 1,320
(6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660
277,051

(1) 165,000
(9) 38,000
(11) 3,614
(12) 96,195

(2) 1,485

Rent Expense
(25) 1,485
0

Merchandise Inventory
(3) 137,500
(14) 38,140
(13) 49,940
149,300
Furnitures and Fixtures
(4) 15,500
(20) 1,760
17,260
Advertising Expense
(5) 1,320
(25) 1,320
0

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(12) 96,195
(3) 137,500
(13) 49,940
(19) 226
(20) 1100
92,571
Sales Revenue
(9) 38,000
(10) 14,850
52,850
Accrued Wages
(16) 440
440
Depreciation Expense
(21) 144
(25) 144
0
Accumulated Depreciation
(21) 144
144

(6) 935
(15) 688
(16) 440

Wages Expense
(25) 2,063

Interest Expense
(22) 1,250
(25) 1,250
0

0
Interest Payable
(22) 1,250
Office Supplies Expense
(7) 1,100
(25) 1,100
0

(8) 275

Utilities Expense
(25) 501

1,250
Insurance Expense
(23) 193
(25) 193
0

(19) 226
0
Accounts Receivable
(10) 14,850
(11) 3,614
11,236
Cost of Sales
(14) 38,140
(25) 38,140
0
Prepaid Rent
(17) 1,485
1,485
Prepaid Insurance
(18) 2,310
(23) 193
2,117

Income Summary
(25) 46,196**
(24) 52,850
6,654
**total expenses

PC Depot
Income Statement
For the Month Ended September 30, 20XX
Net Sales
Cost of Sales
Gross Margin

$52,850
38,140
14,710

Expenses
Rent
Advertising
Wages
Depreciation
Supplies
Utilities
Insurance
Total Operating Expenses
Other non-operating expense
Interest
Net Income

1,485
1,320
2,063
144
1,100
501
193
6,806
1,250
$6,654

** No provision for income tax / Tax expense excluded in exercise

PC Depot
Balance Sheet
As of September 30, 20XX
Assets
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Insurance
Prepaid Rent
Furnitures and Fixtures
Accumulated Depreciation
Total Assets
Liabilities and Owners' Equity
Liabilities
Accounts Payable
Wages Payable/Accrued Wages
Bank loan payable
Interest Payable
Total Liabilities
Owners' Equity
Proprietor's Capital

$84,661
11,236
149,300
2,117
1,485
$17,260
-144

17,116
$265,915

92,571
440
100,000
1,250
194,261
65,000

Retained Earnings
Total Owners' Equity
Total Liabilities and Owners' Equity

6,654
71,654
$

265,915

Profit Margin

13%

Question 2
Cash
(1) 165,000 (2) 1,485
(4) 15,500
(5) 1,320
(6) 935
(7) 1,100
(8) 275
165,000
20,615
144,385

Rent Expense
(2) 1,485
1,485
Merchandise Inventory
(3) 137,500
137,500
Furnitures and Fixtures
(4) 15,500
15,500
Advertising Expense
(5) 1,320
1,320
Wages Expense
(6) 935
935
Office Supplies Expense
(7) 1,100
1,100
Utilities Expense
(8) 275
75
Rent Expense
(2) 1,485
1,485

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(3) 137,500
137,500

Question 3
Journal Entries
Entries

DR

CR

#9
Cash

38,000
Sales Revenue

38,000

#10
Accounts Receivable
Sales Revenue

14,850
14,850

#11
Cash

3,614
Accounts Receivable

3,614

#12
Accounts paybale
Cash

96,195

Merchandise Inventory
Accounts Payable

49,940

Cost of Sales
Merchandise Inventory

38,140

96,195

#13
49,940

#14
38,140

#15
Wage Expense
Cash

688

Wage Expense
Accrued Wages

440

688

#16
440

#17
Prepaid Rent
Cash

1,485

Prepaid Insurance
Cash

2310

1,485

#18
2310

#19
Utilities Expense
Accounts Payable

226

Furnitures and Fixtures

Cash
Accounts Payable

1,760

226

#20
660
1,100

Cash
(1) 165,000 (2) 1,485
(9) 38,000 (4) 15,500
(11) 3,614 (5) 1,320
(12) 96,195 (6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660
277,051
Rent Expense
(2) 1,485
1,485
Merchandise Inventory
(3) 137,500 (14) 38,140
(13) 49,940
149,300
Furnitures and Fixtures
(4) 15,500
(20) 1,760
17,260
Advertising Expense
(5) 1,320
1,320
Wages Expense
(6) 935
(15) 688
(16) 440
2063

Office Supplies Expense

(7) 1,100
1,100
Utilities Expense
(8) 275
(19) 226
501
Accounts Receivable
(10) 14,850 (11) 3,614
11236

Bank loan payable

(1) 100,000
100,000
Proprietor's Capital
(1) 65,000
65,000
Accounts Payable
(12) 96,195 (3) 137,500
(13) 49,940
(19) 226
(20) 1100
92571
Sales Revenue
(9) 38,000
(10) 14,850
52850
Accrued Wages
(16) 440
440
Cost of Sales
(14) 38,140
38140
Prepaid Rent
(17) 1,485
1485
Prepaid Insurance
(18) 2,310
2310

Question 4
Adjusting Entries
Entries

DR

CR

#21
Depreciation Expense
Accumulated Depreciation

144

17260 / 10 /12
144 143.8333

1250

100,000*.15/12
1250
1250

#22
Interest Expense
Interest Payable
#23
Insurance Expense
Prepaid Insurance

193
193

2310/12
192.5

(3) 137,500
(13) 49,940

(4) 15,500
(20) 1,760

(5) 1,320

(6) 935
(15) 688
(16) 440

(7) 1,100

(8) 275
(19) 226

(10) 14,850

Cash
(1) 165,000
(9) 38,000
(11) 3,614
(12) 96,195

(2) 1,485
(4) 15,500
(5) 1,320
(6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660

277,051
Rent Expense

Bank loan payable

(1) 100,000
100,000

Prepaid Rent
(17) 1,485
1485

Proprietor's Capital
(1) 65,000
65,000

Prepaid Insurance
(18) 2,310 (23) 193
2117

Accounts Payable
(12) 96,195 (3) 137,500
(13) 49,940
(19) 226
(20) 1100
92571

(2) 1,485
1,485
Merchandise Inventory
(3) 137,500
(14) 38,140
(13) 49,940
149,300
Furnitures and Fixtures
(4) 15,500
(20) 1,760
17,260
Advertising Expense
(5) 1,320
1,320

Sales Revenue
(9) 38,000
(10) 14,850
52850
Accrued Wages
(16) 440
440
Depreciation Expense
(21) 144
144
Accumulated Depreciation
(21) 144
144

Wages Expense
(6) 935
(15) 688
(16) 440

Interest Expense
(22) 1,250
1,250
2063

Office Supplies Expense

(7) 1,100
1,100
Utilities Expense
(8) 275
(19) 226
501
Accounts Receivable
(10) 14,850
(11) 3,614
11236

Interest Payable
(22) 1,250
1,250
Insurance Expense
(23) 193
193
Cost of Sales
(14) 38,140
38140

Question 5
Closing Entries
Entries

DR

CR

#24
Sales Revenue
Income Summary

52,850

Income Summary
Expenses

46,196

Bank loan payable

(1) 100,000
100,000

52,850

#25

Proprietor's Capital
(1) 65,000
46,196

65,000

#26
Income Summary
Retained Earnings

6,654
6,654

Cash
(1) 165,000
(9) 38,000
(11) 3,614
(12) 96,195

(2) 1,485
(4) 15,500
(5) 1,320
(6) 935
(7) 1,100
(8) 275
(15) 688
(17) 1,485
(18) 2,310
(20) 660
277,051

Rent Expense
(2) 1,485
(25) 1,485
0
Merchandise Inventory
(3) 137,500
(14) 38,140
(13) 49,940
149,300

Wages Expense
(6) 935
(25) 2,063
(15) 688
(16) 440
0
Office Supplies Expense
(7) 1,100
(25) 1,100
0
Utilities Expense
(8) 275
(25) 501
(19) 226
0
Accounts Receivable
(10) 14,850
(11) 3,614
11,236

Accounts Payable
(12) 96,195
(3) 137,500
(13) 49,940
(19) 226
(20) 1100
92,571
Sales Revenue
(9) 38,000
(10) 14,850
52,850
Accrued Wages
(16) 440
440
Depreciation Expense
(21) 144
(25) 144
0
Accumulated Depreciation
(21) 144
144

Cost of Sales
(14) 38,140
(25) 38,140
0

Furnitures and Fixtures

(4) 15,500
(20) 1,760
17,260

Prepaid Rent
(17) 1,485
1,485

Advertising Expense
(5) 1,320
(25) 1,320
0

Prepaid Insurance
(18) 2,310
(23) 193
2,117

Interest Expense
(22) 1,250
(25) 1,250
0
Interest Payable
(22) 1,250
1,250

Income Summary
(25) 46,196
(24) 52,850
6,654

Insurance Expense
(23) 193
(25) 193
0

PC Depot
Income Statement
For the Month Ended September 30, 20XX
Net Sales
Cost of Sales
Gross Margin

$52,850
38,140
14,710

Expenses
Rent
Advertising
Wages
Depreciation
Supplies
Utilities
Insurance
Total Operating Expenses
Other non-operating expense
Interest
Net Income

1,485
1,320
2,063
144
1,100
501
193
6,806
1,250
$6,654

PC Depot
Balance Sheet
As of September 30, 20XX
Assets
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Insurance
Prepaid Rent
Furnitures and Fixtures
Accumulated Depreciation
Total Assets
Liabilities and Owners' Equity
Liabilities
Accounts Payable
Wages Payable/Accrued Wages
Bank loan payable
Interest Payable
Total Liabilities
Owners' Equity
Proprietor's Capital
Retained Earnings
Total Owners' Equity
Total Liabilities and Owners' Equity

$84,661
11,236
149,300
2,117
1,485
$17,260
-144

17,116
$265,915

92,571
440
100,000
1,250
194,261
65,000
6,654
71,654

265,915